SEBI’s rethink on weekly options: Siddarth Bhamre on what’s at stake for traders

Siddarth Bhamre, Head of Institutional Research at Asit C Mehta Investment Intermediates, said SEBI’s proposed changes to extend the tenure of derivative contracts are likely to have a significant impact on trading volumes.

He explained that many traders earn their livelihoods from weekly options, and moving away from these contracts—potentially to fortnightly or monthly expiries—would inevitably lead to a drop in activity.

Bhamre explained that the extent of the impact will depend on how SEBI implements the change. “We need to see whether we are doing away with weekly for everything or only for a few indices, and whether we are moving to fortnightly or only monthly contracts,” he said.

According to him, a shift to fortnightly contracts may reduce the impact, but moving entirely to monthly contracts would be far more disruptive. He noted that in monthly options, if volatility is low, premiums don’t move much due to time decay. This, he added, would make daily trading difficult for option traders. “If there is no volatility, volumes would come down,” Bhamre cautioned.

On Thursday, SEBI Chairperson Tuhin Kanta Pandey confirmed that the regulator, in consultation with the Finance Ministry, is considering extending the tenure of derivative contracts. This could mean a move away from weekly options, which account for nearly 90% of market volumes, to fortnightly or monthly contracts.

Read Here | BSE, Angel One shares tank up to 8% after SEBI Chairman remarks on equity derivatives tenure

He added that India’s derivatives market has not evolved in the past decade. “Ten to fifteen years back, our derivatives market was more evolved where we had dated long contracts, not just monthly, but in options and futures of index, we had one-year, two-year, three-year contracts, and we had wonderful structured products in market, which has all disappeared,” Bhamre explained.

Bhamre also pointed out that the market is heavily concentrated in index options. “Most of our trades are in index options, and that going weekly, monthly contracts hardly see any open interest. Look at what is happening in stock options. Barring five-six large-cap stocks, there’s hardly any volume in stock options,” he said.

On the path forward, Bhamre was clear. “We go back to monthly, we go back to all those dated options, one year, two-year, three years… eventually, when market matures, then probably selectively you come out with short-dated options also.”

Watch the accompanying video for more

Catch all the stock market live updates here